What is retail trading?
Bonddesk, an alternative trading system, has published an excellent report on what types of muni bonds retail is trading.
Contrary to common wisdom revenue bonds, those NOT backed by taxing authority, were the clear winners as they captured 63% of retail trades.
Average yields in April are shown for bonds maturing in 10 years. (See the report for more yield data.)
|General obligations bonds||Revenue bonds|
|% of retail trades||29%||63%|
[O]ver the past decade, private developers have figured out how to jump on the [muni] bondwagon.
There are now more than 40,000 quasi-governmental agencies across the country that have the authority to issue muni bonds, according to industry experts, and they’ve used their power to finance more than just local schools.
Need a football stadium built?
How about a Hyatt resort?
Or a housing subdivision on vacant farmland?
For all these things, builders turned to the muni market.
Hmmm… we’ve been hearing that general obligation bonds are preferred by retail investors because they are safer and better. But it’s revenue bonds that are trading in big volume.
I look forward to Bonddesk’s report for May.